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The owners' equity accounts for Vulcano International are shown here: a - 1 . If the company's stock currently sells for $ 4 0 per

The owners' equity accounts for Vulcano International are shown here:
a-1.If the company's stock currently sells for $40 per share and a 10 percent stock
dividend is declared, how many new shares will be distributed? (Do not round
intermediate calculations.)
a- Show how the equity accounts would change. (Do not round intermediate
calculations.)
b-1.If instead the company declared a 20 percent stock dividend, how many new
shares will be distributed? (Do not round intermediate calculations.)
New shares issued
b- Show how the equity accounts would change. (Do not round intermediate
calculations.)National Business Machine Company (NBM) has $5.6 million of extra cash after taxes
have been paid. NBM has two choices to make use of this cash. One alternative is to
invest the cash in financial assets. The resulting investment income will be paid out as
a special dividend at the end of three years. In this case, the firm can invest in
Treasury bills yielding 3.4 percent or a 5.8 percent preferred stock. Assume IRS
regulations allow the company to exclude from taxable income 50 percent of the
dividends received from investing in another company's stock. Another alternative is
to pay out the cash now as dividends. This would allow the shareholders to invest on
their own in Treasury bills with the same yield, or in preferred stock. The corporate tax
rate is 21 percent. Assume the investor has a 38 percent personal income tax rate,
which is applied to interest income and preferred stock dividends. The personal
dividend tax rate is 10 percent on common stock dividends.
Suppose the company reinvests the $5.6 million and pays a dividend in three years.
a. What is the total aftertax cash flow to shareholders if the company invests in T-bills?
(Do not round intermediate calculations and enter you answer in dollars, not
millions, rounded to 2 decimal places, e.g.,1,234,567.89.)
b. What is the total aftertax cash flow to shareholders if the company invests in
preferred stock? (Do not round intermediate calculations and enter you answer in
dollars, not millions, rounded to 2 decimal places, e.g.,1,234,567.89.)
a. Value in three years
b. Value in three years
Suppose instead that the company pays a $5.6 million dividend now and the
shareholder reinvests the dividend for three years.
c. What is the total aftertax cash flow to shareholders if the shareholder invests in T-
bills? (Do not round intermediate calculations and enter you answer in dollars,
not millions, rounded to 2 decimal places, e.g.,1,234,567.89.)
d. What is the total aftertax cash flow to shareholders if the shareholder invests in
preferred stock? (Do not round intermediate calculations and enter you answer in
dollars, not millions, rounded to 2 decimal places, e.g.,1,234,567.89.)
c. Value in three years
d. Value in three years
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